Petrobras considers acquisition of US refining capacity

By an OGJ Online Correspondent

RIO DE JANEIRO, Oct. 16 -- In an exclusive interview with OGJ Online, Petroleo Brasileiro SA (Petrobras) Pres. Henri Philippe Reichstul confirmed his company is mulling the possible acquisition of US refining capacity.

"It is important to note that, when we speak about acquiring refining capacity, we will not necessarily purchase a refinery," he said. "Several alternatives are being analyzed, including the renting of idle capacity in the refinery of another company, or even purchasing an industrial plant. But up to now we have not reached a decision."

Reichstul said Brazilian newspapers frequently speculate that Petrobras would acquire a refinery worth $600 million in the US.

"The reality is that Petrobras has the intention of acquiring refining capacity abroad for the surplus of its production in Campos basin. This surplus can be exported, but our target is to add value to the product," he said.

Petrobras owns 11 of Brazil's 13 existing refineries, but downstream operations are its main weakness. Its refineries are antiquated. Its pipelines and tankers are accident-prone. A string of oil spills resulted in fines of at least $93 million.

The company therefore plans to spend $1 billion over the next 2 years to upgrade refineries and to create special teams to deal with environmental emergencies.

Meanwhile, Reichstul reaffirmed Petrobras' intention to take a minority stake in any new Brazilian refineries.

Some 30 years ago, Brazil was so short of petroleum resources that it was forced to convert huge sugar cane crops into gasohol. Now the country produces 75% of the oil products it consumes, thanks to its pioneering work in deepwater exploration and development.

Reichstul expects Brazil to become self-sufficient through its own oil production by 2005.

Petrobras then should be producing 1.9 million b/d, he said. Additional output through 50 joint ventures with private companies is expected to hike total production to 2.1 million b/d, enough to meet the country's needs.

"This year, proven reserves stand at 9.65 billion bbl. By 2005, we expect proven reserves to reach 11.8 billion bbl in Brazil and 13.5 billion bbl if we count the crude oil produced by Braspetro, a Petrobras subsidiary abroad," said Reichstul.

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